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Let's say I am considering buying some on an underlying that I think will recover significantly between now and January 2026, the longest dated option available.
If I look at the Interactive Brokers option chain, I see for example right now:

Underlying current price: $28

January 2026 Calls:
Strike: $50
Option Open Interest: 546
Volume: 28
Bid Size: (varies rapidly from 200 to 800)
Bid: $5.75 (varies slowly)
Ask: $6.20 (varies slowly)
Ask Size: (varies rapidly from 1 to 600)

A couple questions:
- are the bid and ask sizes in # of contracts? (I assume yes, though the numbers are quite large compared to the volume traded)
- the Volume is not changing, even though the bid/ask and bid/ask sizes are changing. Does this mean there are no executions?
- If I want to build a position of, say 15 contracts, how would I do that? Enter orders for a couple contracts at a time, with price midway between bid and ask say?


Mark

- If I want to build a position of, say 15 contracts, how would I do that? Enter orders for a couple contracts at a time, with price midway between bid and ask say?

When I buy calls I place an order for the full number of contracts I want. I start with a limit order just above the bid price. Usually I don't get an execution at that price. After a few minutes I raise my limit a little and wait again. I repeat until the order is filled. Usually I get an execution between the bid and ask, but it's hard to predict where I'll end up within the spread.

Elan

The bids and ask you see are almost certainly from the computer of a market maker.
For the streaming real-time quotes I see at Schwab on an option I'm trying to trade, the bid & ask vary quite rapidly---much faster than a human would be able to do.

My guess is that the bid&ask sizes are essentially meaningless.

All this is just the the computer tracking the price movements of the underlying stock.

Whenever I make an order, I enter the entire number of contracts I want to trade. I start my limit price at the midpoint, which rarely gets a fill. Then every couple to minutes move my price 5 or 10 cents at a time until it does fill.
Problem is that sometimes the stock moves against me and the option trade runs away from me.

If I want to try for an immediate fill, I set my limit at 3/4 inside the spread. These generally fill right away.

Most of my option trades, there are no other trades in that position, and often mine is the only or one of the few open interest.

When I buy calls I place an order for the full number of contracts I want.

Thanks. What if there have been no option trades at your given strike price in some time?
I suppose as long as there is some bid and ask volume, the bid and ask should be meaningful and you go off of those?
Could you potentially offer a price outside the spread?

What I have been contemplating is picking up these long dated calls at say four or five different strikes, with more weighting on the lower ones.
The whole premise is that the underlying is going to recover, at least somewhat, which is if course a big risk.


Mark

What if there have been no option trades at your given strike price in some time?

What if? It doesn't matter. Options are not stocks, it's just people betting against one another.


as long as there is some bid and ask volume, the bid and ask should be meaningful and you go off of those?

Volume does not matter. At least, not in the small quantities we are trading.


Could you potentially offer a price outside the spread?

Sure. But it won't fill.
It's a computer program, with parameters on what trades it will accept. The bid & ask are really "We hope some naif will bite at that price." Or "Fishing for a yokel to make a market order."
You can almost always get a price inside the spread. Sometimes at the mid, often 3/4 of the spread.


The whole premise is that the underlying is going to recover, at least somewhat, which is if course a big risk.

That's gambling. Which most small option traders do because they are hoping to hit a lottery ticket.*
I'd suggest you read some of Jim's posts on buying deep ITM LEAP calls on stocks like BRK.B. Or just reading up on DITM LEAPs as a strategy.

------------------
* I recently stumbled on a category of youtube videos on newbie investors trying to strike it rich with options at Robinhood. Most lose their entire account. All $1000.

I'd suggest you read some of Jim's posts on buying deep ITM LEAP calls on stocks like BRK.B. Or just reading up on DITM LEAPs as a strategy.

Believe me, I pay a lot of attention to Jim's posts. For example http://www.datahelper.com/mi/search.phtml?nofool=y...
I watched bitcoin (GBTC) come down and down and down. When it hovered around $7-$8 about 18 months ago, I remember thinking this could be a speculative bet.
There was proverbial blood in the streets, worries about regulations, GBTC not being approved for ETF status, and on and on and on.
No good news at all. The question was, will it survive?

In hindsight, if one loaded up on various LEAPS at that time, it would have worked out extremely well.
There have been others I've watched that have run into very rough patches, and then recovered over time.
And of course many that have not.

So of course, the underlying in this case may not recover, or may partially recover, or could fully recover (very unlikely IMO).
The point is that you can get a lot of leverage when things look horrendously bad.
It is mostly a bet, but it is also a company and industry that I am very familiar with and have at least a bit of insight into.
You would not bet the farm on it, but a small percentage of the portfolio in the hopes of a recovery, could make sense.

Most lose their entire account. All $1000.

The amount I was contemplating is about 3% of my port. If the company goes bankrupt, it would not be nice, but tolerable.


Mark

"Most lose their entire account. All $1000."

I was making a snarky joke. Somehow youtube started recommending anti-tiktok-investment videos. Of course, nobody sane would take investment advice from a tik-tok video posted by a 20-year-old, but there are evidently lots of people who do just that. After all, if you can invest your entire $500 Robinhood account and make $10,000 in one day, why not?



The amount I was contemplating is about 3% of my port. If the company goes bankrupt, it would not be nice, but tolerable.

Ah.
To me, 3% of my portfolio is a large position. Only 11 of 100 positions are more than 3%.
Which logically begs the question of why bother with holdings that are less than 0.10%. Even if it doubles there is no significant change in the total portfolio value.

(As it turns out, most of those are a component of a screen with 10-20 position.)


I watched bitcoin (GBTC) come down and down and down. When it hovered around $7-$8 about 18 months ago, I remember thinking this could be a speculative bet.

I don't play the lottery. But conceivably some bitcoin thing might be better odds.

Thanks. What if there have been no option trades at your given strike price in some time?
I suppose as long as there is some bid and ask volume, the bid and ask should be meaningful and you go off of those?
Could you potentially offer a price outside the spread?

A few thoughts---

The volume is meaningless, just ignore it. Same with open interest.

In general, the bid and ask are pretty "real". You can generally sell at the bid and buy at the ask if you wanted to--if it moves against you, it's not usually by that much, except for very obscure equities or if you are trading a whole lot of contracts.

Yes, you can set a limit price outside the spread, but of course it won't execute unless/until the range of the spread moves to encompass your price.

The best way to think of the "current price" of an option is the midpoint between the current bid and current ask. Taken across all trading venues, this is how the "official" daily close price of an option is calculated. The best way to think of the gap between bid and ask is just the frictional cost of trading. Plan on paying half the spread on any given trade--if you do better, think of it as a windfall.

I trade a lot of options, though usually on large caps. Usually there is zero volume the day I trade other than me. I can normally get a fill at 3/4 of the way across the gap. That is, if bid/ask is 10.00 and 11.00, I can usually buy at $10.75 or better using a slowly moving limit, and I can usually sell at $10.25 or better. This rule of thumb fades away with smaller caps, where it's not uncommon to have to pay the full gap.

Elan tends to be very patient. I'm not, I just keep moving the limit 5 cents until it fills, about as quickly as I can type. To me it seems that the market maker (algo) has a price at which he/she/it will trade, and I'm just trying to find out what that is. I don't hope for the underlying to cause it to move towards my limit, since it's just as likely to move away.

I find you can usually shave the gap a LOT more if you trade in the last minute of the day, or even 30 seconds. The market maker algorithms seem to be keen to make a quick small buck at that time. Surprisingly often you can get a fill on the "far side" of the gap. e.g., if bid/ask is 10.00/11.00, sometimes you might be able to buy at (say) $10.10.

As for the general idea of long dated calls, it's the main way I make my living. But as with any stock buying, it works when you are entering the position when the price is attractive (preferably more attractive than usual) and you have solid reasons to believe it will be higher at a later date. And the implied interest rate in the option price is not prohibitive. I have some Berkshire calls that I've owned for ages, rolling them from time to time, which I sold today. Great firm, but the price seems a little bit ahead of itself at the moment.

Jim

As for the general idea of long dated calls, it's the main way I make my living. But as with any stock buying, it works when you are entering the position when the price is attractive (preferably more attractive than usual) and you have solid reasons to believe it will be higher at a later date. And the implied interest rate in the option price is not prohibitive. I have some Berkshire calls that I've owned for ages, rolling them from time to time, which I sold today. Great firm, but the price seems a little bit ahead of itself at the moment.

Thanks, Jim and others. Very good information from all.
Long dated calls seem to make more sense to me than short dated ones. Things should be more predictable over the long term.

FYI, (and I still have no real plan to do this), here is what I was thinking for this particular underlying.

Current Price: $30 (down 90% from high).
Buy January 26 calls with a suitable $ amount at several strike prices, say:
$40 strike - 25% of value
$80 strike - 30%
$120 strike - 25%
$160 strike - 15%
$200 strike - 5%

This is based on some levels of future underlying price.
It is easy for me to imagine it recovering back to $150 in the next 17 months or so, and so losing the value in the higher strikes is not a killer.
Pretty surprised if it gets above $200. Not very surprised if it goes belly up in which case the whole experiment would be a write-off.


Mark

Current Price: $30 (down 90% from high).

What is the stock?

And, down 90%???? Down from 300 to 30?
Why would you even touch that with a 10 foot pole?

What is the stock?
And, down 90%???? Down from 300 to 30?
Why would you even touch that with a 10 foot pole?

Actually from $370 to $23 recently for a 94% drop.
It does not matter what the stock is. It only really matters what the prospects for survival and some recovery are.
Obviously it is highly speculative but you will find many examples of severely beaten down stocks that recover.
Bitcoin was one, and I watched in real time as GBTC went from $52 to $8 and now back up to $60 as folks here were discussing it.
These things happen from time to time, and they will always happen.

Don't worry about it Ray, there's little chance I'll do anything about it, I'm not that much of a risk taker.
It will probably be another one of those woulda coulda shoulda things.

Trading options is not something I've done, so I am interested in learning the mechanics of it.


Mark

Actually from $370 to $23 recently for a 94% drop.
It does not matter what the stock is. It only really matters what the prospects for survival and some recovery are.

Why are you being so cagey? If you named the stock maybe someone would give you a worthwhile insight, and I can practically guarantee that no one will attempt to front run you.

Elan

The whole premise is that the underlying is going to recover, at least somewhat, which is if course a big risk.

For what it's worth, I would never buy long calls on stocks that are near their lows in the hope of a turnaround. I only buy calls on stock with good, but not crazy good, upward price momentum.

Elan

Elan tends to be very patient. I'm not, I just keep moving the limit 5 cents until it fills, about as quickly as I can type. To me it seems that the market maker (algo) has a price at which he/she/it will trade, and I'm just trying to find out what that is. I don't hope for the underlying to cause it to move towards my limit, since it's just as likely to move away.

I'm not really any more patient than you. My trading is always a list of five Buy to Open calls and five Sell to Close calls. I cycle through the whole list before going back to the top, so it takes a few minutes between limit moves on each of the options. I've also stopped raising my buy limits one tick (5c or 10c) at a time. Instead I start above the bid by 10% of the spread, and I raise the limit by 10% of the remaining spread gap with each move. So I guess I'm the less patient one. :-) I also recalculate the number of contracts to buy with each move, because I try to buy a pre-determined dollar amount and the trade size may be reduced as my offered price increases.

Elan

Actually from $370 to $23 recently for a 94% drop.
It does not matter what the stock is. It only really matters what the prospects for survival and some recovery are.

Why are you being so cagey? If you named the stock maybe someone would give you a worthwhile insight, and I can practically guarantee that no one will attempt to front run you.

Upstart fits that price profile. UPST

Tails

Why are you being so cagey? If you named the stock maybe someone would give you a worthwhile insight, and I can practically guarantee that no one will attempt to front run you.

Dunno, mostly concerned that it will devolve into tangents and into politics. But you're right, there could be worthwhile insights, so ...

SolarEdge, SEDG. Solar stocks are a bit bubbly, like bitcoin. They go up a lot and down a lot based on news, like tariffs, incentives, who's POTUS, etc.
In general they are good to avoid, like most things that become commoditized.

However I am in that business, and have used their products for 10 years. I am in touch with them regularly, including even today.
Their technical and sales folks visit my growing company pretty regularly, every couple of months. I understand their technology and strengths and weaknesses.
Not that I have any inside information, I don't. But I know what's going on in their company and the industry, their competitors, and the regulatory landscape.

They recently have been one of the largest residential inverter companies in the world.
They have taken a larger hit than almost any of the solar companies for a couple reasons, which in my mind make up the bear case.
They have suffered more than most from high interest rates, which have significantly slowed residential solar and to a lesser extent commercial.
They also made some bad pandemic related decisions, for instance when electronic component shortages caused very high demand a few year ago.
When they finally got the supply chain working, they built too much product, right when interest rates took off and the market slowed down.
This resulted in a huge inventory problem, particularly in Europe.
Even now that inventory problem is not near resolved. They have had two rounds of layoffs, one announced a day or two ago.
Their revenue is down something like 80% in the last few years. Their quality is not where it should be.
There have been changes in the National Electric Code which may somewhat dampen demand for their DC optimizers, the basis of their technology.

Another bear feature is that they are an Israeli company, so there is a certain amount of politics surrounding them.
And concerns about their situation should the war over there escalate.

The bull case is based on a couple things, which seem likely to come to pass.
Interest rates will probably come down at some point. Wars tend to get resolved sooner or later.
Solar is somewhat cyclical; however the climate issue is not going to go away as it's just simple physics.
That's another way of saying the renewable industry seems to be one that will, one way or the other, see continued growth and present opportunities.
So it is a matter of whether SolarEdge's management can get the company through the downturn and come out with new and better products at lower prices (IMO).
They have moved into storage, both residential and commercial, and are moving production to the USA due to incentives from the inflation reduction act.
They have upcoming bidirectional chargers for V2H applications, and a wide customer base. They have some data analytics products as well.

Tesla has recently announced their first DC coupled inverter/battery combo, and Tesla is going after SolarEdge and Enphase with aggressive pricing.
SolarEdge will need to respond to that threat. I am watching closely what happens here.

It is crystal clear that it is a gamble to buy their stock or calls. Frankly, at the moment, I think it's more likely than not that they will flounder and/or fail.
There is a chance, though, that the macro conditions will become favorable and they survive this bad period to grow their revenue back toward where it was before.
And that is where a small bet with the right call options could potentially pay off.


Mark

Upstart fits that price profile. UPST

Indeed it does, almost exactly the same price profile as SEDG!
I bet there are some others. We could make a screen that looks for companies that are down 80% in the last 2-3 years to see how many survive.

Mark

For what it's worth, I would never buy long calls on stocks that are near their lows in the hope of a turnaround. I only buy calls on stock with good, but not crazy good, upward price momentum.

Buying long dated puts on stocks near lows might potentially be more rewarding, statistically : )

For whatever it's worth, VL universe, buy the 5 stocks the furthest from their 52 week highs, hold 3 months.
1999 to 2023: S&P CAGR 11.0%
Portfolio CAGR (no friction): -30.2%

Percent losing stocks: 61.6%
Average loss: -37.1%

Ever consider a short leg for your 6/3 work?
As with most short strategies, this is probably best avoided during the rocket rebound after a big bad bear ends.

Jim

Just for information, I just did one sell and one buy (the next day).

The sell was a limit near the top of the spread. It sat all day but filled at 6 minutes before the close. The underlying stock barely moved. Less than 0.10%


My initial buy limit was 1/2 way in the spread. It did not fill.
I changed the limit closer to the ask, and it filled immediately.

FWIW, the spread was 11.9% -- 201 bid, 225 ask.
Initial was 213.15, then changed to 213.25 which filled.

SEDG

Well, it looks like you'd have company in that longest highest call.
Jan 2026 220 call has 709 open interest and 28 volume today.
bid 0.45, ask 0.60. That's 33% spread. Ugh.
Last trade yesterday 0.55.

But Schwab, Etrade, IBKR -- all charge $0.65 per contract. That would more than double the price!

Robinhood is $0.00, though.

How does the market maker or algo set the bid/ask price for a certain option? Is it a black box? Or Black-Scholes box? Or more to it that that?
For example, today BRK-B 12/26 call with $300 strike is bid $178.30 ask $182.50.
How are those bid/ask prices arrived at?

Mark

But Schwab, Etrade, IBKR -- all charge $0.65 per contract. That would more than double the price!
Robinhood is $0.00, though.

FWIW, I've averaged $0.0289 per contract in the last week at IB.
That's including about 30% of the trades that had negative commissions.

Jim

How does the market maker or algo set the bid/ask price for a certain option? Is it a black box? Or Black-Scholes box? Or more to it that that?
For example, today BRK-B 12/26 call with $300 strike is bid $178.30 ask $182.50.
How are those bid/ask prices arrived at?

My guess. They use something akin to Black-Scholes to arrive at a fair market price for each option. And they decide on a spread that would fairly compensate them for their effort and risk of being a market maker. And then they more or less double that spread to catch free money from rubes who enter market orders or accept whatever the quoted limit is.

But it's not always that way. Sometimes a trader will have an open limit order to buy or sell a particular contract, which will affect the spread at the bid or the ask end, or both. When you see an unusually large spread, like 0.50 bid - 3.00 ask, you know pretty clearly that there are no open limit orders and it's only the market maker setting his rube trap. Other times it's impossible to tell, as far as I know.

Elan

bid 0.45, ask 0.60. That's 33% spread. Ugh.
Last trade yesterday 0.55.

But Schwab, Etrade, IBKR -- all charge $0.65 per contract. That would more than double the price!

Umm, I don't think so. When the ask for an option contract is 0.60, you're actually buying a contract for 100 shares at $60.00. So the commission is 1% of the buy price.

It does get expensive, theoretically, when the bid on one of my options drops to 0 and I ultimately manage to scrape $0.05 out of it. But then Fidelity usually waives the commission.

Elan

rayvt: But Schwab, Etrade, IBKR -- all charge $0.65 per contract. That would more than double the price!

elan: Umm, I don't think so. When the ask for an option contract is 0.60, you're actually buying a contract for 100 shares at $60.00. So the commission is 1% of the buy price.

Guys, you are trading the wrong (too cheap) options. Today I bought a shitload of options at Schwab. For each trade Schwab's fee resulted in around 0.05%, a fee I couldn't care less about. Neither today nor in the past as I was never interested in contracts selling for pennies (Is that then called "Penny contracts", as in "Penny stocks"? 😂)


Jim: FWIW, I've averaged $0.0289 per contract in the last week at IB.

Therefore I have a super user-friendly options chain screen, real-time quotes, can change a bid with a few clicks within seconds etc. etc.

Yes, I believe you if you'd tell me that all of that I could do in my IB account too --- but I am not willing to spend many hours to find out how and to get accustomed to it. No need for that with Schwab when trading options - and fee-wise it's practically free for me, see above (Who cares about 0.05%, especially with options?).

After having collected enough experience now with IB I will use this account for the main reason I set it up, to diversify brokers (and to buy only stuff I intend to hold forever, so that hopefully I'll not have to trade in my IB account, especially not options).

Guys, you are trading the wrong (too cheap) options. Today I bought a shitload of options at Schwab. For each trade Schwab's fee resulted in around 0.05%, a fee I couldn't care less about. Neither today nor in the past as I was never interested in contracts selling for pennies (Is that then called "Penny contracts", as in "Penny stocks"? 😂)

You misunderstood the conversation. Ray commented on a hypothetical trade, and I commented that his commission calculation was wrong. Don't you worry, I haven't bought an option contract priced at less than $1.00 for at least ten years. But sometimes it goes against you and you end up selling it for pennies. That can happen just as well for a contact you originally bought for $10 or $50 or more.

But to your point, the price of an option means nothing. e.g. When NVDA stock split 10 to 1 its options split too, and it had absolutely no effect at all on their desireability. If a particular NVDA option traded for $5 a day before the split, it was just as good the next day, trading at $0.50.

Elan

Umm, I don't think so. When the ask for an option contract is 0.60, you're actually buying a contract for 100 shares at $60.00. So the commission is 1% of the buy price.

Yeah, that's why you can't just believe whatever you see on the internet.

::blush::

Current Price: $30 (down 90% from high).
Buy January 26 calls with a suitable $ amount at several strike prices, say:
$40 strike - 25% of value
$80 strike - 30%
$120 strike - 25%
$160 strike - 15%
$200 strike - 5%

I would not do it that way for a number of reasons.

First, if the strike is above the price, you are buying time value, which is a wasting asset. If you get it well below 30.00, you are getting intrinsic value that does not waste away. Also, there is the delta. If the strike is well below the 30.00, the delta is close to one, so for every dollar the stock goes up, the premium could go up 2.50 or so. I think that is the correct way to use leaps.

First, if the strike is above the price, you are buying time value, which is a wasting asset. If you get it well below 30.00, you are getting intrinsic value that does not waste away. Also, there is the delta. If the strike is well below the 30.00, the delta is close to one, so for every dollar the stock goes up, the premium could go up 2.50 or so. I think that is the correct way to use leaps.

Thx, I will have to think about that. You are saying to only purchase in-the-money calls?

The whole premise is that the underlying stock price will have a recovery and rise over the term of the leap. That of course is a gamble.
Assuming it does, then you can assume some values; for example it rises to $60, or $90, or $140, or $180 sometime during the period.
For each of those scenarios, you calculate a total return based on buying the various strike prices listed above.
You get a lot of leverage from the farther OTM calls - if the stock price rises sufficiently of course.



Mark

Well one advantage of buying in the money calls is that assuming things don't go the way you wanted, you get to keep the intrinsic value. I don't think it is that hard to get 93% intrinsic value. So if the stock stayed the same, you would only be down 7%, instead of losing everything.

Well one advantage of buying in the money calls is that assuming things don't go the way you wanted, you get to keep the intrinsic value. I don't think it is that hard to get 93% intrinsic value. So if the stock stayed the same, you would only be down 7%, instead of losing everything.

That's in keeping with one of my main insights about using leverage:
FIRST, pick something you're absolutely sure will be higher at a later date, even if the rate of return is low and you're not sure when it will be higher.
THEN (and only then), add leverage.
Even a very small amount of leverage will turn a modest return into an excellent return.
The flip side is, never add leverage to something speculative (anything you don't consider pretty close to a sure thing): it's risky, and there is no need to take that risk.

In the context of long calls, the advantage is that the lower the leverage (deeper in the money the strike is), the lower the implied interest rate on the borrow is AND the lower the amount being borrowed on which you're paying the interest rate.

Jim

In the context of long calls, the advantage is that the lower the leverage (deeper in the money the strike is), the lower the implied interest rate on the borrow is

Roughly, but not exactly and not always.
Example, XSP on 7/17/24, expiration 6/18/26. XSP at 561.85
Assuming price 3/4 into the spread.

Strike  pseudo-interest rate
330 4.86%
340 4.88%
350 4.91%
360 4.93%
370 5.12%
380 4.67% <<<<< lowest rate. -32.4% ITM, 2.50X leverage
390 5.00%
400 5.02%
410 5.19%
420 5.20%
430 5.36%
440 5.52%
450 5.66%
460 5.81%
470 5.94%
480 6.21%
485 6.27%
490 6.33%
500 6.59%
510 7.09%
520 6.75%
530 6.98%
540 7.21%

In the context of long calls, the advantage is that the lower the leverage (deeper in the money the strike is), the lower the implied interest rate on the borrow is
...
Roughly, but not exactly and not always.
Example, XSP on 7/17/24, expiration 6/18/26. XSP at 561.85
Assuming price 3/4 into the spread...

True enough.

But the little outliers are usually the result of someone actually being in the middle of trying to trade one of those contracts. Thus the bid and ask you see at that level aren't the (mostly) smooth curve you generally see from market makers, but somebody's actual bid trying to execute in the middle of that range. Sometimes this is clear from looking at the bid size across the strikes. You might see 50,50,50,3,50,50.

If there is a big outlier I sometimes patch the bid in my spreadsheet to be the average of the next higher and next lower numbers, just so my little graph looks pretty. That's because your probable execution price is a percentage across the market maker's bid and ask, not usually the bid or ask of an actual counterparty.

Separately, it's true that the implied interest rate is often about the same for deep in the money strikes and DEEP in the money strikes, and so the statistical noise dominates, leading you to see slightly higher and lower rates around a pretty flat central trend. The implied rate improvement is mainly seen closer to the stock price.

Jim

But the little outliers are usually the result of someone actually being in the middle of trying to trade one of those contracts. Thus the bid and ask you see at that level aren't the (mostly) smooth curve you generally see from market makers, but somebody's actual bid trying to execute in the middle of that range.

Good point. This would push the midpoint up and thus you think you should offer more than the actual midpoint.
You'd get a more accurate view by plotting the ASK, because you are assured you can get it at the ASK. The ASK is undoubtedly from a market maker.

FWIW, I just pulled the quotes from Etrade, for XSP 6/18/26 calls into my spreadsheet.
Here it is, with values only, no formulas/calulations, using the ASK price:
https://docs.google.com/spreadsheets/d/e/2PACX-1vS...

The chart(s) at the bottom (below row 83) plot the interest rate vs. strike.
Also is the chart from an hour or so later.

You'd get a more accurate view by plotting the ASK, because you are assured you can get it at the ASK. The ASK is undoubtedly from a market maker.

I don't think this is true. Someone placing a limit order to buy inside the spread pushes up the bid. And someone placing a limit order to sell inside the spread pushes down the ask.
I do about the same number of transactions on the buy and sell side, and the effect is symmetrical.

Elan

someone placing a limit order to sell inside the spread pushes down the ask.
I do about the same number of transactions on the buy and sell side, and the effect is symmetrical.

Yes, but...
In these DITM LEAPS there is no or little open interest, so it is unlikely that there is any public investor trying to sell the calls. But, for my example purposes, it doesn't matter who the seller is. You are assured that if you offer the ask it will fill.
And if it is another investor undercutting the market maker, that is a GOOD thing, since you are getting a better price on your buy.

Also, isn't most of your trades in 6/3 options? That is a different territory.

I almost always sell-to-close my options just before they expire, and again/still they are so deep ITM that there is little open interest.

In these DITM LEAPS there is no or little open interest, so it is unlikely that there is any public investor trying to sell the calls.

I'm not sure that this is solid reasoning...if someone decides to write that option, it shows up as as "sell", and the contract never before existed. I can't think of any reason to think that the bid or the ask is more likely to be a market maker or bot. If I want to know, especially for the thinly traded things, the quantity at the bid and ask is the best bet. Generally when I'm looking at the trade-offs I just graph the rates and ignore the outliers.

Jim

Does it matter if a market maker will fill it?

Does it matter if a market maker will fill it?

No, it doesn't. For most option contracts there are no open limit orders at any given moment, other than those created by the market makers. So for almost every option trade you make the counter party is most likely a market maker. That is the reason they exist. That's why they are called market makers.

Elan

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